OKLAHOMA CITY--(BUSINESS WIRE)--
Devon Energy Corp. (NYSE: DVN) today reported operational and financial
results for the second quarter of 2018. Also included within the release
is the company’s guidance outlook for the third quarter and full-year
2018.

“Devon is executing at a very high level on our 2020 Vision,” said Dave
Hager, president and CEO. “Operationally, our second-quarter performance
was headlined by strong well productivity in the Delaware Basin and
STACK, which drove light-oil production above the high end of our
guidance expectations. Importantly, we converted this volume growth into
higher profits with our access to premium pricing in advantaged markets
and through our success in driving both field-level and corporate costs
lower.

“With the strong well productivity we’ve achieved year to date in the
U.S., light-oil production growth is on track to advance 16 percent in
2018, which is 200 basis points above our original budget expectations,”
said Hager. “We expect to deliver this improved outlook without any
increase to our planned activity, and this disciplined investment
program positions us to generate substantial amounts of free cash flow
at today’s market prices.

“In addition to our strong operating results, we took a significant step
forward in achieving our 2020 Vision by further simplifying our asset
portfolio through our monetization of EnLink,” said Hager. “This highly
accretive transaction provides a strategic exit from EnLink at a value
of 12 times cash flow, and we’re returning the sales proceeds to our
shareholders through our industry-leading $4 billion share-repurchase
program.”

Delaware Basin and STACK Drive U.S. Oil Production Beat

Production results in the quarter were highlighted by oil growth from
Devon’s U.S. resource plays, which are attaining the highest margins and
returns in Devon’s portfolio. In the quarter, light-oil production in
the U.S. averaged 136,000 barrels per day, a 12 percent increase
compared to the first quarter of 2018. This result exceeded the top end
of guidance by 2,000 barrels per day.

The strongest asset-level performance during the second quarter was from
the company’s Delaware Basin assets. Light-oil production increased 54
percent year over year in the quarter, driving total volumes in the
Delaware to 79,000 oil-equivalent barrels (Boe) per day. Growth in the
Delaware was driven by prolific well productivity, where the top 10
wells in the quarter averaged initial 30-day rates of approximately
3,000 Boe per day.

Devon’s STACK assets also delivered strong results during the quarter.
Total production in the STACK advanced 26 percent compared to the second
quarter of 2017. Driven by several strong wells across the play, oil
production delivered the highest growth rate, increasing 41 percent year
over year.

In Canada, net oil production averaged 109,000 barrels per day in the
second quarter. Scheduled maintenance at the company’s Jackfish facility
curtailed production by approximately 15,000 barrels per day. Also
contributing to lower production was a 2 percentage point increase in
royalty rates because of higher commodity prices and improved
profitability.

Overall, total companywide production averaged 541,000 Boe per day in
the second quarter. Oil accounted for the largest component of the
product mix at 45 percent of total volumes. For additional details on
Devon’s E&P operations in the quarter, please refer to the company’s
second-quarter 2018 operations report at www.devonenergy.com.

Light-Oil Production Growth on Track to Increase 16 Percent in 2018

With the strong well productivity Devon has achieved year to date in the
U.S., light-oil production growth is on track to advance 16 percent in
2018. This growth rate is trending at approximately 200 basis points
above the company’s original budget expectations.

The incremental oil growth in the U.S. is expected to be delivered
without an increase to Devon’s capital activity. This disciplined
investment program positions the company to generate free cash flow in
the second half of 2018 at today’s market prices.

EnLink Ownership Interests Monetized at 12 Times Cash Flow

In mid-July, Devon completed the sale of its ownership interests in
EnLink Midstream Partners, LP (NYSE: ENLK) and EnLink Midstream, LLC
(NYSE: ENLC) for $3.125 billion. The company’s interests in EnLink
generated $265 million of cash distributions over the past year, valuing
the investment at approximately 12 times cash flow. Devon expects no
incremental corporate cash taxes resulting from this sale.

With the closing of the EnLink transaction, combined with other minor
asset sales achieved to date, total proceeds from Devon’s divestiture
program have now reached $4.2 billion. The company expects to monetize
an additional $1 billion of minor, non-core assets across the United
States by year-end. These divestiture packages include undeveloped
leasehold in the southern Delaware Basin, enhanced oil recovery projects
in the Rockies and Midland Basin along with Wise County acreage in the
Barnett Shale. Data rooms are open for the majority of these packages
and bids are expected throughout the second half of 2018.

Industry-Leading Share-Repurchase Program Increased to $4 Billion

In conjunction with closing the EnLink transaction, Devon’s board of
directors authorized an increase in the company’s share-repurchase
program to $4 billion. This authorization represents the largest
share-repurchase program in the upstream industry when measured as a
percentage of market capitalization. At the end of July, Devon had
repurchased 24 million shares, or nearly 5 percent of outstanding
shares, at a total cost of approximately $1 billion.

For the remaining share-repurchase authorization, the company plans to
utilize a series of accelerated stock repurchase programs (ASR) that are
expected to commence in early August. With these ASR programs, Devon
expects to complete its $4 billion share-repurchase program during the
first half of 2019. Detailed forward-looking guidance on share count is
provided later in this release.

Financial Reporting Impact of EnLink Monetization

With the closing of the EnLink transaction, the financial results of
EnLink Midstream will no longer be consolidated with Devon’s upstream
business, and historical results related to EnLink will be presented as
discontinued operations in the company’s consolidated financial
statements.

To assist with this financial reporting transition, Devon has provided
pro forma financial statements for its upstream business in a Form 8-K
filing in July. Additionally, updated detailed forward-looking guidance
for financial statement line items impacted by this transaction in 2018
is provided later in this release.

Upstream Revenue Benefits from Premium Gulf Coast Pricing

Devon’s upstream revenue, excluding commodity derivatives, totaled $1.6
billion in the second quarter, a 15 percent improvement compared to the
previous quarter. The strong growth in revenue was driven by growth in
higher-margin, light-oil production coupled with improved price
realizations across the company’s asset portfolio.

Also contributing to the improving price realizations in the quarter
were Devon’s firm transport and marketing agreements that provide the
majority of U.S. oil production direct access to premium Gulf Coast
markets. Combined with the price protection provided by regional basis
swaps, second-quarter oil realizations in the U.S. averaged
approximately 98 percent of the West Texas Intermediate benchmark.
Importantly, the company is positioned to maintain these strong U.S. oil
price realizations through the end of the decade.

In Canada, Devon continues to benefit from Western Canadian Select (WCS)
basis swaps on approximately 50 percent of its estimated oil production
in 2018. These attractive WCS basis swaps are locked in at $15 off the
WTI benchmark price and have generated cash settlements of $109 million
year to date.

U.S. Operating Costs Improve and Field-Level Margins Expand

Devon continued to effectively manage operating costs during the second
quarter. Production expense, which represents field-level operating
costs, totaled $572 million in the second quarter. The largest
components of production expense are lease operating expense and
transportation, which totaled $493 million in the quarter. Taxes also
contributed $79 million to production expense during the second quarter.

The company’s U.S. resource plays delivered the strongest cost
performance, where lease operating expense and transportation costs
declined 3 percent on a per-unit basis compared to the first quarter. In
Canada, production expense in the quarter was impacted by $21 million of
non-recurring costs associated with maintenance work at the Jackfish
complex.

Overall, the benefits of higher-margin oil production, improved price
realizations and a lower cost structure resulted in expanded margins for
Devon. Field-level cash margin reached $20.19 per Boe in the second
quarter, a 31 percent increase compared to the year-ago period.
Field-level cash margin is computed as upstream revenues, excluding
commodity derivatives, less production expenses with the result divided
by oil equivalent production volumes.

Corporate Cost Structure to Improve by $475 Million Annually

Further expanding Devon’s profitability is its improving general and
administrative (G&A) cost structure. Upstream-related G&A expenses
totaled $153 million, a 22 percent improvement compared to the first
quarter. The significantly lower overhead costs were driven by reduced
personnel expenses.

The company has also reduced financing costs. With the early retirement
of $807 million of debt early in the year, the company expects to reduce
net financing costs by approximately $64 million on an annual basis.

The aforementioned cost savings, combined with the financial benefits
related to the sale of EnLink Midstream, position Devon’s go-forward G&A
and interest expense to improve by approximately $475 million annually.

Investment-Grade Financial Position Continues to Strengthen

Devon’s financial position remains exceptionally strong, with
investment-grade credit ratings and excellent liquidity. The company
exited the second quarter with $1.5 billion of cash on hand. Adjusted
for the sale of EnLink Midstream in July, pro forma cash balances
reached $4.6 billion and the company’s consolidated debt declined by 40
percent to $6.1 billion.

Second-Quarter Earnings and Cash-Flow Results

The company reported a net loss attributable to Devon of $425 million or
$0.83 per diluted share in the second quarter. Excluding the impact of
noncontrolling interests, the company reported a net loss of $335
million. Devon’s results were impacted by certain items securities
analysts typically exclude from their published estimates. After
excluding adjusting items, the company’s core earnings totaled $177
million or $0.34 per diluted share. Adjusted earnings before interest,
taxes, depreciation and amortization (EBITDA) reached $1.0 billion in
the quarter.

Devon’s operating cash flow from continuing operations totaled $269
million in the second quarter. Operating cash flow in the quarter was
impacted by several non-recurring or unusual items, including a non-cash
foreign exchange loss, restructuring charges, EnLink’s reclassification
to discontinued operations and working capital changes. The most
significant item was related to a non-cash, foreign exchange loss. This
impact was driven by foreign currency denominated intercompany loan
activity resulting in a realized loss of $244 million as a result of the
strengthening of the U.S. dollar in relation to the Canadian dollar. For
more understanding of the company’s cash flow performance during the
quarter please refer to the explanations and reconciliations provided
later in this release.

Pursuant to regulatory disclosure requirements, Devon is required to
reconcile non-GAAP (generally accepted accounting principles) financial
measures to the related GAAP information. Reconciliations of these
non-GAAP measures are provided within the tables of this release.

Conference Call Webcast and Supplemental Earnings Materials

Also provided with today’s release is the company’s detailed operations
report that is available on the company’s website at www.devonenergy.com.
The company’s second-quarter conference call will be held at 10 a.m.
Central (11 a.m. Eastern) on Wednesday, Aug. 1, 2018, and will serve
primarily as a forum for analyst and investor questions and answers.

Forward-Looking Statements

This release includes "forward-looking statements" as defined by the
Securities and Exchange Commission (SEC). Such statements include those
concerning strategic plans, expectations and objectives for future
operations, and are often identified by use of the words “expects,”
“believes,” “will,” “would,” “could,” “forecasts,” “projections,”
“estimates,” “plans,” “expectations,” “targets,” “opportunities,”
“potential,” “anticipates,” “outlook” and other similar terminology. All
statements, other than statements of historical facts, included in this
press release that address activities, events or developments that the
company expects, believes or anticipates will or may occur in the future
are forward-looking statements. Such statements are subject to a number
of assumptions, risks and uncertainties, many of which are beyond the
control of the company. Statements regarding our business and operations
are subject to all of the risks and uncertainties normally incident to
the exploration for and development and production of oil and gas. These
risks include, but are not limited to: the volatility of oil, gas and
NGL prices; uncertainties inherent in estimating oil, gas and NGL
reserves; the extent to which we are successful in acquiring and
discovering additional reserves; the uncertainties, costs and risks
involved in oil and gas operations; regulatory restrictions, compliance
costs and other risks relating to governmental regulation, including
with respect to environmental matters; risks related to our hedging
activities; counterparty credit risks; risks relating to our
indebtedness; cyberattack risks; our limited control over third parties
who operate our oil and gas properties; midstream capacity constraints
and potential interruptions in production; the extent to which insurance
covers any losses we may experience; competition for leases, materials,
people and capital; our ability to successfully complete mergers,
acquisitions and divestitures; and any of the other risks and
uncertainties identified in our Form 10-K and our other filings with the
SEC. Investors are cautioned that any such statements are not guarantees
of future performance and that actual results or developments may differ
materially from those projected in the forward-looking statements. The
forward-looking statements in this release are made as of the date of
this release, even if subsequently made available by Devon on its
website or otherwise. Devon does not undertake any obligation to update
the forward-looking statements as a result of new information, future
events or otherwise. The SEC permits oil and gas companies, in their
filings with the SEC, to disclose only proved, probable and possible
reserves that meet the SEC's definitions for such terms, and price and
cost sensitivities for such reserves, and prohibits disclosure of
resources that do not constitute such reserves. This release may contain
certain terms, such as resource potential, potential locations, risked
and unrisked locations, estimated ultimate recovery (or EUR),
exploration target size and other similar terms. These estimates are by
their nature more speculative than estimates of proved, probable and
possible reserves and accordingly are subject to substantially greater
risk of being actually realized.The SEC guidelines strictly
prohibit us from including these estimates in filings with the SEC.
Investors are urged to consider closely the disclosure in our Form 10-K,
available at www.devonenergy.com.
You can also obtain this form from the SEC by calling 1-800-SEC-0330 or
from the SEC’s website at www.sec.gov.

About Devon Energy

Devon Energy is a leading independent energy company engaged in finding
and producing oil and natural gas. Based in Oklahoma City and included
in the S&P 500, Devon operates in several of the most prolific oil and
natural gas plays in the U.S. and Canada with an emphasis on achieving
strong returns and capital-efficient cash flow growth. For more
information, please visit www.devonenergy.com.

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

PRODUCTION NET OF ROYALTIES

Quarter Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

Oil and bitumen (MBbls/d)

U. S. - Core

136

113

129

117

Heavy Oil

109

122

119

130

Retained assets

245

235

248

247

Divested assets

—

3

—

2

Total

245

238

248

249

Natural gas liquids (MBbls/d)

U. S. - Core

105

90

98

89

Divested assets

4

7

5

8

Total

109

97

103

97

Gas (MMcf/d)

U. S. - Core

1,013

1,010

1,007

1,012

Heavy Oil

12

14

12

18

Retained assets

1,025

1,024

1,019

1,030

Divested assets

103

184

133

188

Total

1,128

1,208

1,152

1,218

Total oil equivalent (MBoe/d)

U. S. - Core

409

371

395

375

Heavy Oil

111

124

121

133

Retained assets

520

495

516

508

Divested assets

21

41

27

42

Total

541

536

543

550

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

PRODUCTION TREND

2017

2018

Quarter 2

Quarter 3

Quarter 4

Quarter 1

Quarter 2

Oil and bitumen (MBbls/d)

STACK

25

27

30

35

35

Delaware Basin

30

31

32

36

46

Rockies Oil

13

12

15

18

16

Heavy Oil

122

121

132

129

109

Eagle Ford

34

28

27

23

28

Barnett Shale

1

1

1

1

1

Other

10

11

9

9

10

Retained assets

235

231

246

251

245

Divested assets

3

2

—

—

—

Total

238

233

246

251

245

Natural gas liquids (MBbls/d)

STACK

31

32

34

37

38

Delaware Basin

10

11

13

11

16

Rockies Oil

1

1

1

2

2

Eagle Ford

10

12

13

8

13

Barnett Shale

35

29

36

31

34

Other

3

2

3

2

2

Retained assets

90

87

100

91

105

Divested assets

7

7

6

6

4

Total

97

94

106

97

109

Gas (MMcf/d)

STACK

298

313

316

344

352

Delaware Basin

94

90

89

97

100

Rockies Oil

17

13

14

18

18

Heavy Oil

14

16

15

12

12

Eagle Ford

92

86

87

63

74

Barnett Shale

496

498

466

470

460

Other

13

10

13

10

9

Retained assets

1,024

1,026

1,000

1,014

1,025

Divested assets

184

175

175

163

103

Total

1,208

1,201

1,175

1,177

1,128

Total oil equivalent (MBoe/d)

STACK

105

111

117

129

132

Delaware Basin

55

57

60

64

79

Rockies Oil

17

16

19

23

21

Heavy Oil

124

124

134

131

111

Eagle Ford

60

54

55

41

54

Barnett Shale

118

113

114

110

111

Other

16

14

13

13

12

Retained assets

495

489

512

511

520

Divested assets

41

38

36

33

21

Total

536

527

548

544

541

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

BENCHMARK PRICES

(average prices)

Quarter 2

June YTD

2018

2017

2018

2017

Oil ($/Bbl) - West Texas Intermediate (Cushing)

$

67.83

$

48.32

$

65.38

$

50.16

Natural Gas ($/Mcf) - Henry Hub

$

2.80

$

3.19

$

2.90

$

3.25

REALIZED PRICES

Quarter Ended June 30, 2018

Oil /Bitumen

NGL

Gas

Total

(Per Bbl)

(Per Bbl)

(Per Mcf)

(Per Boe)

United States

$

65.41

$

24.10

$

2.01

$

31.97

Canada

$

31.70

N/M

N/M

$

31.17

Realized price without hedges

$

50.43

$

24.10

$

2.01

$

31.81

Cash settlements

$

(5.80

)

$

(1.66

)

$

0.13

$

(2.68

)

Realized price, including cash settlements

$

44.63

$

22.44

$

2.14

$

29.13

Quarter Ended June 30, 2017

Oil /Bitumen

NGL

Gas

Total

(Per Bbl)

(Per Bbl)

(Per Mcf)

(Per Boe)

United States

$

46.65

$

13.26

$

2.50

$

23.58

Canada

$

29.05

N/M

N/M

$

28.50

Realized price without hedges

$

37.63

$

13.26

$

2.50

$

24.72

Cash settlements

$

0.29

$

(0.03

)

$

0.04

$

0.22

Realized price, including cash settlements

$

37.92

$

13.23

$

2.54

$

24.94

Six Months Ended June 30, 2018

Oil /Bitumen

NGL

Gas

Total

(Per Bbl)

(Per Bbl)

(Per Mcf)

(Per Boe)

United States

$

63.71

$

23.38

$

2.21

$

31.20

Canada

$

25.24

N/M

N/M

$

24.84

Realized price without hedges

$

45.25

$

23.38

$

2.21

$

29.79

Cash settlements

$

(2.93

)

$

(1.13

)

$

0.16

$

(1.23

)

Realized price, including cash settlements

$

42.32

$

22.25

$

2.37

$

28.56

Six Months Ended June 30, 2017

Oil /Bitumen

NGL

Gas

Total

(Per Bbl)

(Per Bbl)

(Per Mcf)

(Per Boe)

United States

$

48.18

$

14.36

$

2.59

$

24.72

Canada

$

27.60

N/M

N/M

$

27.03

Realized price without hedges

$

37.48

$

14.36

$

2.59

$

25.28

Cash settlements

$

0.39

$

(0.02

)

$

—

$

0.19

Realized price, including cash settlements

$

37.87

$

14.34

$

2.59

$

25.47

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except per share amounts)

Quarter Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

Upstream revenues

$

1,069

$

1,332

$

2,388

$

2,873

Marketing revenues

1,180

833

2,059

1,692

Total revenues

2,249

2,165

4,447

4,565

Production expenses

572

455

1,115

912

Exploration expenses

68

57

101

152

Marketing expenses

1,160

849

2,033

1,728

Depreciation, depletion and amortization

420

369

819

769

Asset impairments

154

—

154

—

Asset dispositions

23

(22

)

11

(30

)

General and administrative expenses

153

181

352

376

Financing costs, net

62

77

449

160

Restructuring and transaction costs

94

—

94

—

Other expenses

24

(8

)

45

(22

)

Total expenses

2,730

1,958

5,173

4,045

Earnings (loss) from continuing operations before income taxes

(481

)

207

(726

)

520

Income tax benefit

(7

)

(5

)

(41

)

—

Net earnings (loss) from continuing operations

(474

)

212

(685

)

520

Net earnings from discontinued operations, net of income tax expense

139

33

197

42

Net earnings (loss)

(335

)

245

(488

)

562

Net earnings attributable to noncontrolling interests

90

26

134

40

Net earnings (loss) attributable to Devon

$

(425

)

$

219

$

(622

)

$

522

Basic net earnings (loss) per share:

Basic earnings (loss) from continuing operations per share

$

(0.92

)

$

0.40

$

(1.33

)

$

0.99

Basic earnings from discontinued operations per share

0.09

0.01

0.13

—

Basic net earnings (loss) per share

$

(0.83

)

$

0.41

$

(1.20

)

$

0.99

Diluted net earnings (loss) per share:

Diluted earnings (loss) from continuing operations per share

$

(0.92

)

$

0.40

$

(1.33

)

$

0.99

Diluted earnings from discontinued operations per share

0.09

0.01

0.13

—

Diluted net earnings (loss) per share

$

(0.83

)

$

0.41

$

(1.20

)

$

0.99

Weighted average common shares outstanding:

Basic

521

526

524

525

Diluted

524

529

527

528

UPSTREAM REVENUES

(in millions)

Quarter Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

Oil, gas and NGL sales

$

1,566

$

1,206

$

2,926

$

2,515

Derivative cash settlements

(131

)

11

(120

)

19

Derivative valuation changes

(366

)

115

(418

)

339

Upstream revenues

$

1,069

$

1,332

$

2,388

$

2,873

PRODUCTION EXPENSES

(in millions)

Quarter Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

Lease operating expense

$

269

$

239

$

510

$

462

Gathering, processing & transportation

224

160

452

323

Production taxes

67

41

126

96

Property taxes

12

15

27

31

Production expense

$

572

$

455

$

1,115

$

912

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

Quarter Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

Cash flows from operating activities:

Net earnings (loss)

$

(335

)

$

245

$

(488

)

$

562

Adjustments to reconcile net earnings to net cash

from operating activities:

Earnings from discontinued operations, net of tax

(139

)

(33

)

(197

)

(42

)

Depreciation, depletion and amortization

420

369

819

769

Asset impairments

154

—

154

—

Leasehold impairments

53

22

61

64

Accretion on discounted liabilities

15

15

31

32

Total (gains) losses on commodity derivatives

497

(126

)

538

(358

)

Cash settlements on commodity derivatives

(131

)

11

(120

)

19

(Gains) and losses on asset dispositions

23

(22

)

11

(30

)

Deferred income tax expense (benefit)

20

(17

)

(18

)

(32

)

Share-based compensation

58

45

96

81

Early retirement of debt

—

—

312

—

Total (gains) losses on foreign exchange

31

(49

)

81

(64

)

Settlements of intercompany foreign denominated assets/liabilities

(244

)

1

(243

)

10

Other

(20

)

23

(50

)

11

Changes in assets and liabilities, net

(133

)

102

(108

)

133

Net cash from operating activities - continuing operations

269

586

879

1,155

Cash flows from investing activities:

Capital expenditures

(602

)

(434

)

(1,253

)

(831

)

Acquisitions of property and equipment

(10

)

(13

)

(16

)

(33

)

Divestitures of property and equipment

560

75

607

107

Net cash from investing activities - continuing operations

(52

)

(372

)

(662

)

(757

)

Cash flows from financing activities:

Repayments of long-term debt principal

—

—

(807

)

—

Early retirement of debt

—

—

(304

)

—

Repurchases of common stock

(428

)

—

(499

)

—

Dividends paid on common stock

(42

)

(33

)

(74

)

(65

)

Shares exchanged for tax withholdings

(6

)

(3

)

(44

)

(56

)

Net cash from financing activities - continuing operations

(476

)

(36

)

(1,728

)

(121

)

Effect of exchange rate changes on cash:

Settlements of intercompany foreign denominated assets/liabilities

244

(1

)

243

(10

)

Other

(17

)

9

(31

)

10

Total effect of exchange rate changes on cash – continuing operations

227

8

212

—

Net change in cash, cash equivalents and restricted cash of

continuing operations

(32

)

186

(1,299

)

277

Cash flows from discontinued operations:

Operating activities

236

151

430

328

Investing activities

(222

)

(215

)

(402

)

(284

)

Financing activities

73

128

112

89

Net change in cash, cash equivalents and restricted cash of

discontinued operations

87

64

140

133

Net change in cash, cash equivalents and restricted cash

55

250

(1,159

)

410

Cash, cash equivalents and restricted cash at beginning of period

1,470

2,119

2,684

1,959

Cash, cash equivalents and restricted cash at end of period

$

1,525

$

2,369

$

1,525

$

2,369

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents

$

1,460

$

2,358

$

1,460

$

2,358

Restricted cash included in other current assets

28

—

28

—

Cash and cash equivalents included in current assets held for sale

37

11

37

11

Total cash, cash equivalents and restricted cash

$

1,525

$

2,369

$

1,525

$

2,369

DEVON ENERGY CORPORATION

FINANCIAL AND OPERATIONAL INFORMATION

CONSOLIDATED BALANCE SHEETS

(in millions)

June 30,

December 31,

2018

2017

Current assets:

Cash and cash equivalents

$

1,460

$

2,642

Accounts receivable

1,141

989

Current assets held for sale

10,764

760

Other current assets

455

400

Total current assets

13,820

4,791

Oil and gas property and equipment, based on successful efforts
accounting, net

12,957

13,318

Other property and equipment, net

1,164

1,266

Total property and equipment, net

14,121

14,584

Goodwill

841

841

Other long-term assets

377

296

Long-term assets held for sale

—

9,729

Total assets

$

29,159

$

30,241

Current liabilities:

Accounts payable

$

771

$

633

Revenues and royalties payable

959

748

Short-term debt

277

115

Current liabilities held for sale

5,291

991

Other current liabilities

1,079

828

Total current liabilities

8,377

3,315

Long-term debt

5,790

6,749

Asset retirement obligations

1,088

1,099

Other long-term liabilities

624

549

Long-term liabilities held for sale

—

3,936

Deferred income taxes

432

489

Equity:

Common stock

51

53

Additional paid-in capital

6,888

7,333

Retained earnings

6

702

Accumulated other comprehensive earnings

1,091

1,166

Treasury stock, at cost, 0.5 million shares in 2018

(22)

—

Total stockholders’ equity attributable to Devon

8,014

9,254

Noncontrolling interests

4,834

4,850

Total equity

12,848

14,104

Total liabilities and equity

$

29,159

$

30,241

Common shares outstanding

515

525

CAPITAL EXPENDITURES

(in millions)

Quarter Ended

Six Months Ended

June 30, 2018

June 30, 2018

Upstream capital

$

607

$

1,271

Land and other acquisitions

12

18

Exploration and production (E&P) capital

619

1,289

Capitalized interest

17

35

Other

9

22

Devon capital expenditures

$

645

$

1,346

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL
INFORMATION

NON-GAAP FINANCIAL MEASURES

This press release includes non-GAAP financial measures. These non-GAAP
measures are not alternatives to GAAP measures, and you should not
consider these non-GAAP measures in isolation or as a substitute for
analysis of our results as reported under GAAP. Below is additional
disclosure regarding each of the non-GAAP measures used in this press
release, including reconciliations to their most directly comparable
GAAP measure.

CORE EARNINGS

Devon’s reported net earnings include items of income and expense that
are typically excluded by securities analysts in their published
estimates of the company’s financial results. Accordingly, the company
also uses the measures of core earnings and core earnings per share
attributable to Devon. Devon believes these non-GAAP measures facilitate
comparisons of its performance to earnings estimates published by
securities analysts. Devon also believes these non-GAAP measures can
facilitate comparisons of its performance between periods and to the
performance of its peers. The following table summarizes the effects of
these items on second-quarter 2018 earnings.

(in millions, except per share amounts)

Quarter Ended June 30, 2018

Before-tax

After-tax

AfterNoncontrollingInterests

Per DilutedShare

Continuing Operations

Loss attributable to Devon (GAAP)

$

(481

)

$

(474

)

$

(474

)

$

(0.92

)

Adjustments:

Asset dispositions

23

18

18

0.03

Asset and exploration impairments

207

159

159

0.31

Deferred tax asset valuation allowance

—

73

73

0.14

Fair value changes in financial instruments and foreign currency

376

291

291

0.56

Restructuring and transaction costs

94

72

72

0.14

Core earnings attributable to Devon (Non-GAAP)

$

219

$

139

$

139

$

0.26

Discontinued Operations

Earnings attributable to Devon (GAAP)

$

149

$

139

$

49

$

0.09

Adjustments:

Fair value changes and minimum volume commitment settlement

(36

)

(30

)

(11

)

(0.01

)

Core earnings attributable to Devon (Non-GAAP)

$

113

$

109

$

38

$

0.08

Total

Loss attributable to Devon (GAAP)

$

(332

)

$

(335

)

$

(425

)

$

(0.83

)

Adjustments:

Continuing Operations

700

613

613

1.18

Discontinued Operations

(36

)

(30

)

(11

)

(0.01

)

Core earnings attributable to Devon (Non-GAAP)

$

332

$

248

$

177

$

0.34

NET DEBT

Devon defines net debt as debt less cash and cash equivalents. Devon
believes that netting these sources of cash against debt provides a
clearer picture of the future demands on cash from Devon to repay debt.

(in millions)

June 30,

2018

Total debt (GAAP)(1)

$

6,067

Less cash and cash equivalents

(1,460)

Net debt (Non-GAAP)

$

4,607

(1) Excludes EnLink since its debt-related amounts are included in
liabilities held for sale.

DEVON ENERGY CORPORATIONFINANCIAL AND OPERATIONAL
INFORMATION

ADJUSTED EBITDA

We define Adjusted EBITDA, a non-GAAP financial measure, as EBITDA
adjusted for certain items presented in the accompanying reconciliation.
We believe that EBITDA is widely used by investors to measure a
company’s performance without regard to items such as interest expense,
taxes, depreciation and amortization, which can vary substantially from
company to company depending upon accounting methods and book value of
assets, capital structure and the method by which assets were acquired.
In addition, Adjusted EBITDA generally excludes certain other items that
management believes affect the comparability of operating results or are
not related to Devon’s ongoing operations. Management uses Adjusted
EBITDA to evaluate the company’s operational trends and performance
relative to other oil and gas companies.

(1) Does not include benefits from basis swaps and firm
transportation agreements.

OTHER GUIDANCE ITEMS

Quarter 3

Full Year

($ millions, except Boe and %)

Low

High

Low

High

Marketing & midstream operating profit

$

5

$

15

$

40

$

50

LOE & GP&T per BOE

$

9.50

$

9.75

$

9.40

$

9.90

Production & Property Tax (% of upstream sales)

5.20

%

5.40

%

5.20

%

5.40

%

Exploration expenses

$

20

$

30

$

90

$

100

Depreciation, depletion and amortization

$

420

$

470

$

1,700

$

1,800

General & administrative expenses

$

150

$

170

$

650

$

700

Financing costs, net(2)

$

70

(2)

$

80

(2)

$

285

(2)

$

295

(2)

Other expenses

$

15

$

20

$

60

$

80

Current income tax rate

0

%

5

%

0

%

5

%

Deferred income tax rate

20

%

25

%

20

%

25

%

Total income tax rate

20

%

30

%

20

%

30

%

Average basic share count outstanding (MM)

493

496

500

505

(2) On a go-forward basis interest expense that had been
historically capitalized will now be included in financing costs,
net.

CAPITAL EXPENDITURES GUIDANCE

Quarter 3

Full Year

(in millions)

Low

High

Low

High

Upstream capital

$

550

$

600

$

2,200

$

2,400

Capitalized interest and other(2)

20

30

100

150

Total

$

570

$

630

$

2,300

$

2,550

DEVON ENERGY CORPORATIONFORWARD LOOKING GUIDANCE

Oil Commodity Hedges

Price Swaps

Price Collars

Period

Volume (Bbls/d)

WeightedAverage Price($/Bbl)

Volume (Bbls/d)

WeightedAverage FloorPrice ($/Bbl)

Weighted AverageCeiling Price($/Bbl)

Q3-Q4 2018

91,300

$

58.15

100,700

$

52.27

$

62.87

Q1-Q4 2019

54,225

$

59.34

65,875

$

52.76

$

62.76

Oil Basis Swaps

Oil Basis Swaps

Oil Basis Collars

Period

Index

Volume (Bbls/d)

WeightedAverageDifferential toWTI ($/Bbl)

Volume (Bbls/d)

WeightedAverage FloorDifferential toWTI ($/Bbl)

WeightedAverageCeilingDifferential toWTI
($/Bbl)

Q3-Q4 2018

Midland Sweet

23,000

$

(1.02

)

—

$

—

$

—

Q3-Q4 2018

Argus LLS

12,000

$

3.95

—

$

—

$

—

Q3-Q4 2018

Argus MEH

15,832

$

2.82

—

$

—

$

—

Q3-Q4 2018

NYMEX Roll

21,315

$

0.63

—

$

—

$

—

Q3-Q4 2018

Western Canadian Select

78,000

$

(14.91

)

2,000

$

(15.50

)

$

(13.93

)

Q1-Q4 2019

Midland Sweet

28,000

$

(0.46

)

—

$

—

$

—

Q1-Q4 2019

Argus LLS

1,000

$

4.60

—

$

—

$

—

Q1-Q4 2019

Argus MEH

16,000

$

2.84

—

$

—

$

—

Q1-Q4 2019

NYMEX Roll

24,000

$

0.51

—

$

—

$

—

Q1-Q4 2020

NYMEX Roll

24,000

$

0.31

—

$

—

$

—

Natural Gas Commodity Hedges - Henry Hub

Price Swaps

Price Collars

Period

Volume (MMBtu/d)

WeightedAverage Price($/MMBtu)

Volume (MMBtu/d)

WeightedAverage FloorPrice ($/MMBtu)

Weighted AverageCeiling Price($/MMBtu)

Q3-Q4 2018

278,750

$

2.91

246,500

$

2.76

$

3.09

Q1-Q4 2019

194,000

$

2.81

155,750

$

2.64

$

3.03

Natural Gas Basis Swaps

Period

Index

Volume (MMBtu/d)

Weighted AverageDifferential toHenry Hub($/MMBtu)

Q3-Q4 2018

Panhandle Eastern Pipe Line

120,000

$

(0.51

)

Q3-Q4 2018

El Paso Natural Gas

100,000

$

(1.25

)

Q3-Q4 2018

Houston Ship Channel

115,000

$

0.01

Q3-Q4 2018

Transco Zone 4

15,000

$

(0.03

)

Q1-Q4 2019

Panhandle Eastern Pipe Line

62,500

$

(0.77

)

Q1-Q4 2019

El Paso Natural Gas

120,000

$

(1.48

)

Q1-Q4 2019

Houston Ship Channel

100,000

$

(0.01

)

Q1-Q4 2019

Transco Zone 4

7,500

$

(0.03

)

Devon’s oil derivatives settle against the average of the prompt month
NYMEX West Texas Intermediate futures price. Devon’s natural gas
derivatives settle against the Inside FERC first of the month Henry Hub
index. Commodity hedge positions are shown as of July 27, 2018.

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